Latest news with #borrowers
CBS News
3 days ago
- Business
- CBS News
Credit card debt, interest rates and what borrowers should do right now
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Paying off your high-rate credit card debt should remain a priority, even in today's unique economic atmosphere. unknown/Getty Images The news released this May that credit card debt balances were declining appeared to be positive on the surface. Certainly, a decline in what borrowers owe is preferable to a spike. But upon closer examination, this seemingly good news wasn't exactly what it appeared to be. For starters, credit card balances in the United States in the first quarter of 2025 remained very high, at a total of $1.18 trillion. While that was down $29 billion from the previous quarter, it still represented a 6% rise from the same period in 2024. And with the average credit card debt hovering close to $8,000 currently, there's likely a lot of work left for borrowers to complete to regain their financial freedom. And that work shouldn't be put off any further, particularly in today's unique economic atmosphere. Fortunately, there are multiple debt relief options available that are worth exploring, some of which borrowers may want to get started with as soon as this June. Below, we'll detail why they should act quickly – and how they may want to do so. Start by checking your credit card debt relief eligibility requirements here. Credit card debt, interest rates and what borrowers should do right now Not sure if it's worth taking aggressive action to reduce your credit card debt? Here are three items to consider to help you determine your next steps: Your current credit card debt amount Sure, you may owe less than that $8,000 average amount … or you may owe more. Either way, if you can't pay off what you owe in its entirety, then it may make sense to pursue some form of debt relief. And that doesn't have to mean utilizing the services of a debt relief provider, as options like balance transfer credit cards and debt consolidation loans may be able to be secured on your own, and dramatically reduce your interest rates in the interim, providing a clearer path toward total debt payoff. Just don't sit idle, no matter which option you prefer, as credit card interest compounds daily, turning even a manageable debt load prohibitive. Explore your alternative debt relief solutions online now. The broader interest rate climate If your plan is to wait for the broader interest rate climate to cool and, for that cooling to significantly reduce your currently high credit card interest rates, then you may be waiting for a very long time. Right now, there's almost no chance of a fed rate cut for when the central bank meets again in June (the CME Group's FedWatch tool has a rate pause there listed at nearly a 100% certainty). Rate cuts could become more realistic in July, but even then, by just 25 basis points, which will have little to no impact on your credit card rates (which are influenced by multiple factors besides just the Fed). Being realistic about this interest rate climate, then, and its likelihood to change in a helpful way soon, can better help you move to the next step this June: finding the right debt relief option for your particular situation. Your debt relief alternatives Did you know that you could qualify to have 30% to 50% of your credit card debt forgiven? If you meet certain qualifications, this is certainly possible. But it's not the only way to get rid of your credit card debt with aforementioned items like balance transfer credit cards, debt consolidation loans possible too, along with credit counseling, debt management programs and more all playing critical roles for borrowers in need of a debt solution now. You won't know which is applicable to your unique situation, however, until you've taken the time to explore and research all of them. Consider doing so now, then, and make this June the first stop on your journey toward full financial freedom. The bottom line The economic climate credit card users find themselves in this June isn't exactly a favorable one. With credit card balances high, interest rates elevated and the prospect of relief for either dim, it makes sense to be proactive with an appropriate debt relief approach. By understanding the dynamics of today's economy and being realistic about these developments, borrowers can feel more comfortable exploring their debt relief options and, from there, choosing one (or multiple) that can help them reduce what they owe once and for all.
The Independent
3 days ago
- Business
- The Independent
Struggling mortgage holders warned fake loophole claims could worsen problems
Mortgage holders who are struggling with their payments are being warned they could make problems worse by acting on fake claims about legal loopholes and conspiracy theories claiming they cannot be held liable for their debts. The Financial Conduct Authority (FCA) said that people in financial difficulty and at risk of losing their home should beware of misleading claims that they are not legally bound by their mortgage contract. It urged struggling borrowers to instead speak to their lender, who could offer various options to support them. The FCA has updated its consumer web pages to warn people about false and harmful information. The regulator said it is aware of mortgage holders in financial difficulty being misled by online misinformation, often with serious financial consequences. Claims may use arguments dating back to the Magna Carta and people may also attempt to apply them to other types of debt or taxes. In a bid to stop their home being repossessed, mortgage holders may end up paying others a fee to take their claims to court. But, as well as being unsuccessful due to claims not being legally valid, people could also risk losing a big chunk of the equity they had in their home (the difference between the outstanding mortgage balance and the value of the property), the FCA said. This is due to increased costs related to repossession, legal fees and the impact these activities can have on the value of their homes. Even if someone cannot afford to stay in their home, their lender may be able to help them sell. This would at least mean that money left over from the sale is not spent on legal fees or other arrears and repossession costs. Greg Sachrajda, head of department in retail banking market interventions at the FCA, told the PA news agency: 'There is a risk that people who are in financial difficulty, and at risk of risking losing their home, are particularly susceptible to arguments that make things sound better.' He said: 'If something seems too good to be true, it usually is.' He continued: 'If you borrow money, you're required to repay it, and you only make the situation worse by trying to rely on false arguments which the courts are rejecting. 'We know people are desperate and can be struggling with their mortgage, and they may feel that things can't get any worse. But the reality is that unfortunately they can get worse. 'We've seen examples of people not only losing their home but also then getting less back from the proceeds of the sale of the home.' He said that is because lenders are incurring additional costs, which are then passed on to the consumer. Mr Sachrajda said that 'real help is available', adding: 'Our message to consumers is: 'Don't fall for these false, misleading arguments but instead speak to your lender who can help with real options to make things better.'' He said that lenders are required to treat borrowers who are in financial difficulty sensitively and fairly. Some options can prevent people from losing their home, by extending the term of the loan or temporarily switching to an interest-only mortgage, or agreeing a payment holiday, for example. In some situations, selling the property may be the appropriate next step, he said, adding: 'But even then they can help, because many lenders offer what we call an 'assisted voluntary sale' and that essentially gives the borrower more time to sell the property and the lender can help with both the costs of that process and also how to navigate the sales process to make that easier. 'And that can then help maximise the amount of money the customer makes from the sale.' As well as contacting their lender, people could also consider contacting a trusted service that can provide free help, Mr Sachrajda suggested. Organisations providing free support include the National Debtline (run by the Money Advice Trust), StepChange, Citizens Advice and the Government-backed MoneyHelper service. A spokesperson for banking and finance industry body UK Finance said: 'Struggling with mortgage payments can become overwhelming, however it's important to beware of advice circulating online which could put your home and finances at serious risk. 'It's always worth seeking independent legal advice before acting on information you find online, as understanding your legal position fully will help protect you from costly mistakes. 'If you're struggling with mortgage payments it's important to speak to your lender as early as possible, as they'll be able to offer a range of tailored options to help you. Lenders have dedicated teams who can work with you to find a way forward – whether that's adjusting repayment plans or exploring alternative solutions.'
Yahoo
3 days ago
- Business
- Yahoo
When refinancing still makes sense despite high mortgage rates
Refinancing in today's current rate environment isn't for everyone, but there are several reasons why it could be for you. People refinance for reasons beyond the rate. These include tapping equity, changing the loan type and removing a co-borrower from the mortgage. Rates aren't expected to drop much in 2025, but there could be pockets where they dip. Borrowers poised to take advantage of these dips could see some savings if they're refinancing from a higher rate. The amount of mortgage refinances has drastically slowed since the low rates of 2020 through 2022. The 30-year mortgage rate has hovered in the high-6 percent and low-7 percent range since 2023, according to Bankrate's weekly survey, with periodic crests and falls. It's likely that rates will stay stuck in this range for most of 2025, say experts surveyed by Bankrate. Yet, there are still reasons where it might make sense for you to refinance now. Let's dig into them. For most mortgage holders, refinancing right now would not lead to a lower mortgage rate. Over 84 percent of mortgage holders have a rate below 6 percent, according to a report from As a rule of thumb, you want to refinance to a rate that's at least 1 percent lower than your current rate. That's because refinancing isn't free — you'll pay closing costs, and with a 1 percent drop in your rate, it can still take one to three years to break even. For example, say you had a remaining loan balance of $390,000, and you were charged a 1 percent origination fee along with another $1,000 in closing costs. You also paid one mortgage point. At that rate, it would take you approximately 20 months to break even. As of May 28, the average rate on a 30-year purchase mortgage was 6.94 percent, according to Bankrate's weekly survey. That means you'd ideally want to refinance to a rate of 5.94 percent or below — a rate we haven't seen since 2022. Even though rates aren't dropping below 6 percent in the short-term, there may still be reasons to refinance. For instance, if you got a mortgage when rates were closer to 8 percent, like at the tail end of 2023, a refinance now could save you money. Refinancing isn't a one-size-fits-all thing. For many people, refinancing may not be a clear-cut, lower-rate decision. Here are a few examples of when refinancing in a high-rate environment might make sense. Along with overall market factors, interest rates are determined by your own personal finances. Your credit score and debt-to-income (DTI) ratio are going to impact how favorable of a rate you get. Let's say you got a mortgage at the tale end of 2022, when rates were reaching a high point, and put 5 percent down. Your credit score at the time was 650, and you had a DTI ratio of 36 percent. Because of your finances, you landed a mortgage with an interest rate of 7.35 percent. However, since then, let's say you've managed to pay down your debt and build your credit score to 750. If you're able to secure a mortgage at 6.5 percent or below, especially if you plan to stay in the home long-term, you could refinance to lower your payment. Refinancing to a different loan type may be beneficial, even if the rate isn't that much lower than what you're paying now. For instance, if you have an FHA loan, you may be paying an annual mortgage insurance premium (MIP) on top of your mortgage payment. Depending on how much the mortgage insurance is, refinancing may be beneficial to remove it. Similarly, if you have an adjustable-rate mortgage (ARM) and the introductory rate is about to end, refinancing to a fixed-rate mortgage could make your payments more affordable and more predictable. In 2020, over one million ARMs were originated, according to Home Mortgage Disclosure Act (HMDA) data. Once the intro period ends on an ARM (which usually ranges from three to 10 years), they switch to a variable rate that is often higher than the current fixed mortgage rate. This makes refinancing before the intro rate ends an appealing move. If you share a mortgage with someone else, and you need to remove them, you may want to refinance. This is pretty common when married couples get divorced. You may need to buy out the other borrower, which could be done through tapping equity when refinancing. However, it's important to know that there's a difference between removing someone from the mortgage and removing their ownership rights. You can remove a co-borrower by refinancing, but you'll still need to file a quitclaim deed to negate their ownership rights. Your home is an asset that you can tap to pay for major expenses. College tuition, home improvements, medical care — these are just a few common reasons people refinance to tap their home equity. But why would you opt for a cash-out refinance versus getting a home equity line of credit (HELOC) or home equity loan? First off, refinance rates are lower than HELOCs or home equity loans. The catch is that you'd be replacing your primary mortgage with a new mortgage that could have a higher rate. This isn't as much of a big deal if you're towards the end of your primary mortgage term or if your home is paid off. Before you opt to refinance in the current rate environment, you need to ask yourself some questions to determine your goals: What's your break-even timeline? If you're trying to refinance to lower your payment, you need to know how long it will take to realize the savings after closing costs. How long do you plan to own your home? You'll want to stay in the home long enough to break-even and realize savings from refinancing. Do you plan to refinance again if rates drop? Ask yourself — what if rates fall further in 2026 or 2027? Will you be willing to refinance again? Would tapping equity with a HELOC or home equity loan be better? If you want to cash in on your home's equity, ask yourself what the best option is. Would you prefer to refinance and replace your current rate, or would it be better to keep your current primary mortgage and get a second lien? Should you buy points? Mortgage points help lower your rate further, but you have to pay for them. This increases your break-even time, but will result in you paying less interest overall. However, if you decide to refinance again or sell the house, you may not see as much of a savings from buying points as you hoped.
CBS News
4 days ago
- Business
- CBS News
Is credit card debt forgiveness the same as debt settlement?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are multiple credit card debt relief options that borrowers should consider exploring if they can't repay all that they owe. Getty Images The idea that borrowers may be able to have some of their credit card debt forgiven is naturally appealing. But in the economic climate of recent years, this possibility has become particularly powerful. Thanks to a combination of higher interest rates on borrowing products, a stubborn (if significantly cooled) inflation rate and hard-to-predict economic policies and changes, many Americans have turned to credit cards to make ends meet. But credit cards haven't been immune to market conditions, with rates here rising to a record 23% last fall (they've only come down slightly since). That's made the average credit card debt of approximately $8,000 particularly difficult to pay down and has resulted in many borrowers exploring their debt relief options. Credit card debt forgiveness, in which borrowers could see 30% to 50% of their balance forgiven, can be especially advantageous in this climate. To understand how it works and the qualifications, however, it's important to clarify a few items. One important one starts by defining what credit card debt forgiveness is (and what it isn't). Below, we'll complete that analysis and, importantly, help you determine if this is the right debt relief solution for your circumstances. Start by checking your credit card debt relief qualifications here. Is credit card debt forgiveness the same as debt settlement? Credit card debt forgiveness is also known as debt settlement, and they're often viewed the same way by servicers. Technically, credit card debt forgiveness can occur in multiple ways, either through a negotiated debt settlement process, a specific bankruptcy type, or sometimes through a debt management program. You won't be able to have your credit card debt forgiven, however, without first having a debt settlement agreement in place, even though that agreement could be reached via multiple avenues. So, yes, credit card debt forgiveness is often considered the same as debt settlement, although it helps to clarify the definition of each service with the debt relief company in question, as their interpretation of the service could be different than the competitors. Learn more about having your credit card debt forgiven now. How to qualify for credit card debt forgiveness So now that you understand the nuance in the definition between credit card debt forgiveness and debt settlement, you may be wondering about your qualifications. How do you get 30% to 50% of your credit card debt forgiven? Here are the three main qualifications: A credit card debt balance minimum of between $5,000 and $10,000. Being behind on payments (typically the further delinquent A financial hardship These are the main qualifications; however, many debt relief companies may require you to meet more criteria to move forward. So don't automatically assume you'll qualify. Instead, shop around for debt relief companies and research each one's forgiveness criteria to determine which is easiest to qualify for. Compare debt relief companies here to learn more. The bottom line Debt settlement and credit card debt forgiveness are often used interchangeably when discussing credit card debt relief. So don't get confused by their similarities. Instead, take the time to review all of your debt relief options (of which there are many) to better understand how they work, who qualifies and, perhaps most importantly, which one will be most appropriate for your debts. By doing this research now and by understanding the nuances of each approach, you can make the right choice and start the delayed work of regaining your financial freedom.
CBS News
4 days ago
- Business
- CBS News
How to qualify for student loan forgiveness now
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are numerous ways to pursue student loan forgiveness right now — and there are plenty of other options if you don't you have student loans, you've likely noticed just how much the rules around forgiveness have changed lately. From the restart of previously paused payments to sweeping overhauls of repayment plans, the past few years have completely reshaped the way borrowers approach student loan debt. These changes have added another layer of confusion to an already complex system, as programs that once seemed like a sure thing, or options that once seemed out of reach, now come with fine print that's easy to miss. These new rules, along with the shifting eligibility requirements and evolving repayment programs, have left many student loan borrowers feeling uncertain about where they stand and what options they actually have for having their student loan debt forgiven. For some, student loan debt forgiveness may still be within reach, but for others, the path has only gotten more difficult. And with so much noise about who qualifies and what's been rolled back, it's no wonder so many borrowers are left scratching their heads. If you're one of the many who's struggling to keep up with your student loan payments in today's tough economic landscape, a good place to start in today's landscape is to know your options, whether you're hoping to qualify for full cancellation or just want to find a more manageable way to repay what you owe. Below, we'll examine what it takes to qualify for student loan forgiveness right now — and what to do if you don't. Chat with a debt relief expert about how to better manage your debt today. How to qualify for student loan forgiveness now First, it's important to understand that federal student loan forgiveness programs only apply to federal student loans. If you have private student loans — those issued by banks, credit unions or online lenders — you're not eligible for federal forgiveness programs. So, knowing which type of loans you have is step one. You can find out by logging in to or checking your loan servicer's website. If you do have federal loans, here are the key forgiveness options available in 2025: Public Service Loan Forgiveness (PSLF) The Public Student Loan Forgiveness program is open to borrowers with direct federal loans who work full-time for a qualifying employer, typically government or nonprofit organizations. After making 120 qualifying monthly payments on an income-driven repayment (IDR) plan, you may be eligible to have your remaining balance forgiven. If your loans aren't already direct loans, you may need to consolidate to qualify. Find out more about your debt relief options online now. Income-Driven Repayment (IDR) Income-driven repayment plans like the Saving on a Valuable Education (SAVE) plan, Income-Based Repayment (IBR) plan, Pay As You Earn (PAYE) repayment plan and Income-Contingent Repayment (ICR) plan calculate your monthly payment based on your income and family size. If you make consistent payments for 20 or 25 years (depending on the plan), the remaining balance can be forgiven. Borrower Defense Loan Discharge program If your school misled you or committed certain legal violations, you may be eligible to have your federal loans forgiven through the Borrower Defense program. This is most relevant for borrowers who attended for-profit institutions that have since shut down or faced legal action. Teacher Loan Forgiveness (TLF) Teachers who work full-time in low-income schools for five consecutive years may qualify for up to $17,500 in federal student loan forgiveness through the Teacher Loan Forgiveness program. This only applies to certain federal loans and can interfere with PSLF eligibility, though, so it's worth weighing which option is more beneficial in the long term. Remember, though, that none of these apply to private student loans. If all your loans are private, you won't qualify for forgiveness, but that doesn't mean you're without options. What to do if you don't qualify for student loan forgiveness There are still ways to manage your student debt and reduce the financial pressure, even if you don't meet federal forgiveness criteria or your loans are private. Here's what to consider if you don't qualify: If you have federal student loans: Switch to an IDR plan: If you're struggling to afford payments, enrolling in an income-driven repayment plan could lower your monthly amount to something more manageable, and even drop your payments to $0 in some cases. So while you may not qualify for forgiveness now, IDR plans still offer forgiveness after a set number of years. If you're struggling to afford payments, enrolling in an income-driven repayment plan could lower your monthly amount to something more manageable, and even drop your payments to $0 in some cases. So while you may not qualify for forgiveness now, IDR plans still offer forgiveness after a set number of years. Consider loan consolidation: If you have older federal loans like FFEL or Perkins loans, consolidating them into a direct consolidation loan might give you access to IDR plans or PSLF, depending on your situation. If you have older federal loans like FFEL or Perkins loans, consolidating them into a direct consolidation loan might give you access to IDR plans or PSLF, depending on your situation. Review deferment or forbearance options: If you're facing a temporary financial hardship, you may qualify for a pause on payments through deferment or forbearance. Be aware, though, that interest may continue to accrue. If you have private student loans: Refinance for better terms: If your credit score refinancing your student loans If Explore lender-specific hardship options: Some private lenders offer hardship programs, temporary payment relief or interest-only payments to those who are struggling financially and need temporary relief. These options aren't widely advertised, though, so call your lender directly and ask what they offer. Some private lenders offer hardship programs, temporary payment relief or interest-only payments to those who are struggling financially and need temporary relief. These options aren't widely advertised, though, so call your lender directly and ask what they offer. Check for employer repayment assistance: Whether your loans are private or federal, more companies now provide student loan repayment benefits as part of their compensation packages. So, it's worth asking your HR department if this is something you can take advantage of. Learn more about your student loan refinance options here. The bottom line The student loan forgiveness landscape is shifting, but forgiveness may still be within reach if you have federal loans and meet specific requirements. But if your loans are private, or if you don't qualify for forgiveness, you aren't necessarily out of luck. There are still ways to make repayment more manageable, from income-driven repayment plans to refinancing and employer support. The key is to know your loan type and take action based on the options available to you.
